EU Assembles 11 Nations in Support of Transaction Tax

Oct. 9 (Bloomberg) -- The European Commission has assembled
11 nations willing to move ahead with a financial-transaction
tax and aims to draw up plans by November.

The Brussels-based commission will move “very quickly” to
put together a proposal, Tax Commissioner Algirdas Semeta said
at a press conference in Luxembourg today. The announcement
gives new life to an initiative that has been on hold since it
became clear earlier this year there would not be unanimous
agreement among all 27 European Union countries.

Seven nations have formally committed to the tax and four
more have pledged support. Semeta’s office can begin drawing up
plans as soon as it receives two more formal letters, under
“enhanced cooperation” procedures that require nine
participants to move forward.

Spain, Italy, Estonia and Slovakia are the four nations
that have pledged to back the process. France and Germany sent a
letter to begin the process on Sept. 28, followed later by
Austria, Belgium, Portugal, Slovenia and Greece.

Once Semeta’s office has drawn up an outline for the tax,
it must be approved by a weighted majority of all 27 EU members
to move forward. Then participating nations can argue details
among themselves.

‘Degree of Uncertainty’

There’s “still a degree of uncertainty” about the
upcoming transaction tax plan, U.K. Chancellor George Osborne
said at today’s meeting.

Osborne, who has made clear that the country won’t be
signing up to the initiative, called for an “economic
assessment” of the plan, while saying that the U.K. didn’t want
to stand in the way of countries that intend to take part.

A prior version of the proposal sought to tax a broad range
of stocks, bonds and derivatives under a system that would apply
to worldwide transactions for any bank based in the EU. The
European Commission had estimated that plan would raise 57
billion euros ($74 billion) a year, according to estimates from
Semeta’s office.

Technical studies predicted that proposal could have a
small negative impact on economic growth and also recommended
that certain types of trades, like primary bond market sales and
repurchase agreements, be exempt. It’s not clear how broad a
scope Semeta will seek for the smaller group of nations.

“There’s no proposal on the table yet,” Irish Finance
Minister Michael Noonan told reporters in Luxembourg today.
“All that’s announced is that they’re getting together to
design a proposal.”

Noonan said Ireland would not participate or alter its
existing stamp duty, which isn’t assessed on derivatives.

“We have 33,000 people working in financial services, the
bulk of them in Dublin, and if we were to accept a financial-transaction tax and London didn’t, there would be a transfer of
business from Dublin to London and a lot of the jobs would
potentially be lost,” Noonan said.